In case you missed it, on August 31, 2017, Judge Amos Mazzant of the Eastern District of Texas determined that the 2016 Final Rule issued by the U.S. Department of Labor, which increased the minimum salary threshold to $47,476, was not a valid action by the agency.

After finding that the case was ready for judicial decision and the parties at hand could be injured if the court did not intervene, Mazzant addressed all three of the plaintiff’s arguments.

First, the court addressed the state plaintiff’s argument that the Fair Labor Standards Act’s (FLSA) overtime requirements violate the Constitution by regulating the states and coercing them to adopt wage policy choices that adversely affect state budgets. The court held the Supreme Court precedent of Garcia v. Metropolitan Transit Authority established that Congress has the authority under the Commerce Clause to impose FLSA’s minimum wage and overtime requirements on state and local employees.

Next, the court declined to accept the plaintiff’s argument that based on the clear statement rule, the FLSA does not apply to the states. Under that rule, “if Congress intended to alter the ‘usual constitutional balance between the states and the federal government,’ it must make its intention to do so ‘unmistakably clear in the language of the statute.”

The court discarded this argument simply by pointing out the law is applicable to any “enterprise engaged in commerce or in the production of goods for commerce,” and this phrase, by statutory definition, includes the activity of any public agency. Therefore, the court held that the Congress was clear enough in its intention to impact the states.

Failing the Test

Finally, and most importantly, the court agreed with the plaintiffs in finding that the Department of Labor acted outside of the scope of its delegated authority by implementing a salary-level test that effectively eliminated the duties test.

The court adhered to the test established in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., which requires courts to determine whether Congress has spoken directly to the precise question at issue. If Congress has, then the court and agency must follow the intent of Congress.

After interpreting the plain meanings of “executive, administrative and professional,” Mazzant found Congress intended the exemption to apply to employees who perform those duties, rather than those who simply are paid a certain amount. Furthermore, because the new regulations focused more on the salary level than Congress intended, they were found invalid, and the court held the agency acted outside of its delegated authority.

What’s Next?

The Department of Labor published a Request for Information in the July 26 Federal Register, which indicates the agency intends to continue its attempt at overhauling overtime.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Author Bio: As a compliance attorney for Paycom, Zach Gregory monitors legal and regulatory changes at the state and federal levels, focusing on payroll and garnishment laws, to ensure the Paycom system is updated accordingly. He previously worked at a law firm as a tax attorney. He holds a bachelor’s degree from Oklahoma Christian University and a J.D. from Oklahoma City University. Outside of work, Gregory enjoys playing in the backyard with his two boys, and finding new restaurants with his wife and high school sweetheart, Kellyn.

How HR Could Have Helped 3 Complicated On-screen Office Relationships

February 13, 2018

With Valentine’s Day right around the corner, love is in the air and sometimes that romantic air makes its way into the office. Workplace romances may seem like something only seen in film or on TV, but according to Career Builder, 38% of American workers said they have dated a co-worker at least once in their career. That’s over a third of employees, which makes workplace romance an item every organization should have on its radar.

To better understand how HR can prepare and handle potentially tricky conversations, let’s take a look at three complicated workplace romances from film or television – and how HR could have helped.

Mulder and Scully – The X-files

For almost 25 years, special agents Mulder (David Duchovny) and Scully (Gillian Anderson) from The X-Files have been solving supernatural and extraterrestrial cases on television. This pair of government agents work for one of the most well-known organizations in the country, the Federal Bureau of Investigation (FBI). Throughout the series, they slowly become more than just friends or coworkers and have even become romantically involved in the most recent seasons. Each episode features a case that often involves aliens, weird occurrences … and yet another development in Mulder and Scully’s evolving relationship.

How HR can help: The on-again, off-again relationship between Mulder and Scully has left audiences wondering about their status for years. That ambiguity is what makes their relationship unhealthy for the workplace. It’s important for an organization’s policy to hold employees accountable for reporting a romantic relationship with a co-worker. This transparency allows HR to hold a consistent policy that can protect both employees if they break up.

Tom and Summer – 500 Days of Summer

The greeting card industry can be tough, but a brutal breakup in the office can make it even harder! Just ask Tom Hansen (Joseph Gordon Levitt) and Summer Finn (Zooey Deschanel) from the 2009 hit romance film, 500 Days of Summer. The romance that sparked between this on-screen couple turned out to be a bad fit that eventually led to Tom’s depression and complete disengagement from his work. It’s a classic example of how even the most beautiful romances can sometimes go sour.

How HR can help: It’s important for HR to treat their employees like adults who are allowed to make their own mistakes. It is equally important for managers and supervisors to know about office romances so they can be prepared to handle potential drama.

In this film, Summer is the personal secretary of Tom’s manager, Vance. As the long and painful breakup unfolds, Vance is not clued in on the reason behind Tom’s disengagement, which leads to awkward workplace encounters and poor productivity. By incorporating some form of documentation confirming a workplace relationship into your organization’s policy for managers and team leads, you can foster a culture that equips leaders to better address the impact of those painful breakups.

Lois and Clark – Superman

The iconic comic book couple Lois and Clark have appeared on the screen together many times over the last several decades, but let’s take a look at the 1975 film Superman starring Christopher Reeve and Margot Kidder. Pulitzer Prize-winning reporter Lois Lane works closely with Clark Kent, who (unbeknownst to her) lives a life of fighting criminals. In the workplace, they are coworkers with great chemistry, but Lois’ professional-turned-romantic relationship with Clark’s alter ego, Superman, eventually makes her and the entire Daily Planet a target of his rivals. Clark’s dual identities complicate the root of the problem within the workplace, so that his interest in Lois puts the entire organization at risk.

How HR can help: Krypton’s last son may be great at hiding his identity, but ultimately living a life of two identities endangers people in both. That includes his coworkers Jimmy Olson, Perry White and most importantly, his romantic interest, Lois Lane.

It’s up to The Daily Planet’s HR department to screen their candidates through an applicant tracking system with thorough background checks before making a hiring decision. This can help identify potential red flags or conflicts of interest before a new employee joins the team.

This Valentine’s Day, take the opportunity to look closer at your existing workplace romantic relationship policies. These stories make for great entertainment – but an effective policy on workplace romance can help you make sure the drama stays on the screen and out of your office.

Author Bio: Caleb is the host of The HR Break Room and a Webinar and Podcast Producer at Paycom. With more than 5 years of experience as a published online writer and content producer, Caleb has produced dozens of podcasts and videos for multiple industries both local and online. Caleb continues to assist organizations creatively communicate their ideas and messages through researched talks, blog posts and new media. Outside of work, Caleb enjoys running, discussing movies and trying new local restaurants.

Understanding the Tax Cuts and Jobs Act

February 8, 2018

With the Tax Cuts and Jobs Act (TCJA) being signed into law by President Donald Trump on Dec. 22, 2017, several changes to individual and business taxation were made. How those changes affect each taxpayer depends on that individual’s specific situation.

Below is a “big-picture” overview of various provisions affecting businesses and individuals, with more focused guidance on how the new law will affect employer withholding of employee income taxes.

Changes for individuals

The TCJA affects individual income taxes in a number of ways. While the law maintains the seven income brackets used in tax calculation, it reduces the tax rate for five of the brackets:

Previous Rates

10%

15%

25%

28%

33%

35%

39.6%

New Rates

10%

12%

22%

24%

32%

35%

37%

The new law has also changed the withholding rates for supplemental wages. For wages up to $1 million, the current rate is 22%, and for wages over $1 million, the current rate is 37% (previously 25% and 39.6%, respectively).

TCJA has eliminated the personal exemptions for individuals, spouse and dependents. Previously, a married taxpayer filing jointly could claim two exemptions: one for his or her spouse and another for themselves. In that instance, two exemptions of $4,050 each would reduce taxable income by $8,100 total.

While that exemption is gone, the TCJA nearly has doubled the standard deduction. Last year, the standard deduction was $6,350 for single filers and $12,700 for joint filers. For 2018, these levels increased to $12,000 for single and $24,000 for joint filers.

The TCJA makes several other specific changes to individual income taxes, including:

The individual shared responsibility mandate within the Affordable Care Act (ACA) essentially has been removed, as the penalty for noncompliance will become $0, effective Jan. 1, 2019.

Individuals no longer will be able to claim unreimbursed business expenses as itemized deductions.

A $10,000 limit has been placed on the deductibility of other taxes (state income tax, property taxes, etc.).

Donations to universities for athletic seating privileges are no longer deductible.

The child tax credit will double from the previous $1,000 value, up to $2,000 per child.

Changes for businesses

Businesses will need to take note of several changes within the TCJA as well. One key change: The corporate tax rate has been reduced from 35% to 21%.

Additionally, a new short term incentive is in place for businesses who offer FMLA paid leave to their employees. Such businesses will receive a credit of 12.5% for every dollar paid for FMLA leave, up to 50% of an employee’s pay, with an additional 0.25% credit for every 1% paid above 50% of an employee’s pay.

Among various reductions or removal of deductible expenses that businesses should note include:

All of the above items will need to be discussed with your CPA or tax counsel to determine how they apply to your situation.

Frequently asked questions from employers

Some of the most frequent questions we have received since the president’s signing of the law pertain to the withholding tables and Form W-4 questions.

Withholdingtables

The IRS released the new 2018 withholding tables on Jan. 11 in Notice 1036, with more detailed guidance released on Jan. 29 in Notice 2018-14 and Publication 15. (These changes already have been implemented in the Paycom system, ahead of the Feb. 15 implementation deadline from the IRS.)

The IRS designed the 2018 withholding tables so that employees’ existing Form W-4 data could continue to be used. Therefore, the IRS does not require employees to complete a new W-4 for 2018.

Extensions to the 2017 Form W-4

The IRS currently is working on a new 2018 Form W-4 that will allow employees to modify their withholding to take full advantage of the changes in the TCJA. The new form’s expected release is after Feb. 15.

As a result, Notice 2018-14 highlights these items relating to the 2017 Form W-4:

Existing 2017 Forms W-4 furnished to claim exemption from withholding for 2017 would be extended to Feb. 28, 2018.

The 2017 Form W-4 may continue to be used temporarily to claim exemption from withholding in 2018.

The agency temporarily has suspended the requirement that employees must furnish new Forms W-4 to employers within 10 days of changes in states that would reduce withholding allowances they may claim.

Allowances and exemptions

When discussing the effects of the TCJA, it is important to understand the distinction between “allowances,” as claimed on the W-4 that are used for withholding, and “exemptions” that an individual claims on a year-end tax return.

Historically, these numbers are usually the same. For instance, last year they were $4,050 per allowance in withholding and exemptions in year-end tax returns. The number of allowances claimed on the 2017 Form W-4 were multiplied by $4,050, and an employee’s annual wages were reduced by that product to arrive at taxable wages used in withholding calculations. If the employee claimed exemptions on his or her annual return, the number of exemptions claimed likewise was multiplied by the same $4,050 to reduce taxable income on the Form 1040 year-end return.

While the TCJA has eliminated exemptions for 2018, the allowances (as used in calculation of withholding) have not been eliminated; in fact, they were increased to a value of $4,150 per allowance claimed on the W-4. Thus, for every W-4 allowance claimed, an employee’s gross income will be reduced by $4,150 to arrive at taxable wages for use in the withholding calculation. However, no exemptions will be allowed on the employee’s Form 1040 at year-end; moving forward, it is anticipated the worksheet on the 2018 Form W-4 will not include exemptions in the calculation of withholding allowances.

Voluntary submission of 2018 Form W-4

While submitting a 2018 Form W-4 is not required by the IRS at this time, an employee may elect to do so. Employees should look at the 2018 W-4 once it is released, because of the removal of exemptions from the income tax provisions. Employees should calculate the allowances on the new form to determine if they would benefit by submitting a new Form W-4 to their employer to adjust their withholding.

Until the 2018 Form W-4 is released, an employee may voluntarily choose to submit a copy of the 2017 Form W-4 if he or she wants to adjust their withholding for the period prior to the 2018 form’s release.

The recent tax reform is complex, leaving many items to consider for your employees as they head into 2018. Businesses and employees alike would benefit from consulting tax counsel to help determine the most appropriate next steps for their specific situations.

Author Bio: Robert Barclay has been the Tax Research Team Lead at Paycom since 2012, and has been instrumental in such company projects as the development of its Affordable Care Act compliance product, implementation of geolocation services and redesign of Form W-2. He joined Paycom in 2011, bringing more than 20 years of experience with the capital markets consulting practices of Ernst & Young in Memphis, Tenn., and Birmingham, Ala.; and Causey Demgen & Moore in Denver, Colo. A native Oklahoman, Barclay is a graduate of Rhodes College in Memphis, where he played football as linebacker.

Your company’s brand and external reputation may not seem like an HR concern at first, but in this age of technology and social media, the voices of your people actually may be your most important asset.

The way your employees and even job candidates view your company influences the opinions of their online and offline connections, who could be prospects for your business. Social media only amplifies that effect. How can you make sure the effect on your business is a positive one?

1. Communicate your organization’s brand and culture to employees.

A company’s reputation and influence are critical to its success, and the employee experience is a big part of that success. A key element to a great employee experience – especially with millennials – is a workforce that understands the organization’s purpose. An organization’s reason for being must be communicated to workers from the top down, so the employee base can invest in the goals and mission.

A great employee experience empowers and encourages them to share your organization’s mission with their friends and family, including on social media. Your employees have the potential to be your most powerful brand advocates and can sway the way consumers view and interact with your product.

In the same way a great employee experience can turn your people into your most powerful advocates, a poor experience with your brand from employees or candidates can damage your reputation.

When you have a messy careers website or do not respond to an application a prospective employee may have spent hours putting together, you risk sending a negative message that not only could damage your reputation in one person’s eyes, but even may lead to the loss of clients. Even losing one client could result in negative feedback that influences the decision of potential clients.

Doorley recommends talking to candidates and employees with the same respect as one might exhibit when speaking with the media. That level of care can help you ensure that your organization is viewed in the best light by the people who are able to influence your external reputation.

Employers also should ensure consistent employee communication – in person whenever possible, as it’s one of the most important steps to empowering your people to help your organization. That can help you trust that your company’s brand and reputation is the best it can be with employees, candidates and consumers.

Author Bio: Caleb is the host of The HR Break Room and a Webinar and Podcast Producer at Paycom. With more than 5 years of experience as a published online writer and content producer, Caleb has produced dozens of podcasts and videos for multiple industries both local and online. Caleb continues to assist organizations creatively communicate their ideas and messages through researched talks, blog posts and new media. Outside of work, Caleb enjoys running, discussing movies and trying new local restaurants.